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Advisor Perspectives
Insights into the world of high- and ultra-high net worth investing
March 31, 2009- Vol 3, Issue 13
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The financial crisis is forcing universities to reevaluate the "endowment model," and their high
allocations to illiquid investments. Jane Mendillo, CEO of the Harvard Management Company, the largest university
endowment, discusses the changes she is
making within her organization, and their impact on funding
operational needs.
The Q Ratio, originally
developed by Nobel laureate James Tobin, is
a more reliable yardstick for market valuation than P/E ratios, including
P/E ratios that normalize earnings over many years. Right now, the Q Ratio is giving a "modestly
bullish" signal for the US markets.
Michael Kitces, publisher of
the Kitces Report, responds to last week's article, A Safer Four Percent Withdrawal
Rule. Kitces says the results for the all-bond retirement portfolio are quite striking, but they
do not persuade him that the all-bond
portfolio is superior to a bond/equities blend approach - at
least, not quite yet at today's numbers.
Clark Blackman responds to Bob Veres' March 10 article, Casting No Stones, arguing that
the "more sophisticated"
advisors were those who remained committed to their investment strategy in
the face of last fall's turmoil. Blackman says those advisors who
correctly timed the market should consider themselves lucky for getting out
before further damage was done.
No business goal is cited more often than consolidating
accounts held elsewhere, according to Dan Richards. Richards outlines a three-pronged
approach to getting at those held-away assets.
Clients who refer their colleagues and
loved ones are the clients who are
engaged. Industry consultant Kristen Luke describes a month-by-month plan showing how
advisors can improve communications and
get clients more engaged.
In this guest contribution, Barron's writer Michael Kahn says technical analysis, or charting, is the
study of the ebb and flow of real money as
it changes hands. It is not the mysterious voodoo portrayed by some in
financial planning and investment management circles. It is merely a tool used to assess risk and reward and supply and
demand.
In this guest contribution, Brent Bentrim follows up his article two weeks ago and outlines
the process of building portfolios (implementing
the asset allocation strategy) by conducting
manager evaluations customized to an investor's individual minimum
acceptable return while adhering to the investment policy
statement.
In a letter to the Editor, an
advisor responds to our article Why Diversification is Failing
Lastly, we highlight submissions to Advisor
Market Commentaries.
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Inside the Harvard Management Company
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A mere six weeks after taking the helm of the Harvard Management Company, which
oversees the nation's largest university endowment, Jane Mendillo
confronted the Lehman bankruptcy and the unraveling of the financial
markets. Since then, Mendillo has been forced to make abrupt changes
to the endowment's asset allocation in order to raise cash, while her
portfolio has suffered the worst returns in its history.
Read the article
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The Market Valuation Q-uestion
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Currently, the Q ratio is very close to historical bottoms that have
corresponded to beginnings of bull markets. At the beginning of March,
it reached a low of 0.33, at which point John Mihaljevic, a leading expert
on the Q ratio, was strongly bullish - a sentiment that was justified by
the ensuing 20% rally.
Read the article
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Responses
to A Safer Four Percent Withdrawal Rule
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Michael Kitces
does not see a "clear win" for the all-bond retirement portfolio,
and he explains why. A second reader asks about the impact of
advisory fees on safe withdrawal rates, and we provide an answer.
Read the article
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Glass Houses? An Open Letter to Bob Veres
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Clark Blackman warns that if you believe you are going to call the bottom and
get your clients back in at just the right time, remember that lightening
isn't likely to strike the same spot twice. Be wise. Accept
your good fortune, communicate the same to your clients and prospects, and
perhaps when you get caught on the wrong side of fortune next time around
they'll forgive you.
Read the article
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How to Consolidate Client Assets
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Becoming the exclusive financial advisor for key clients has always been a
priority for advisors. These days, however, this is even more important because
advisors are looking to regain some of the assets lost in last year's
market decline. It's also because of the recognition of the risk that if
you don't act, another advisor you share a client with might.
Read the article
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Touch Your Clients 24 Times a Year without Breaking a
Sweat
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While product offerings and customer service are important aspects to
engaging clients, creating deeper client-advisor relationships has
a more significant impact. The most effective way to improve
relationships is to create a goal of touching your clients a fixed number
of times per year.
Read the article
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Risk Control for Advisors
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Technical analysis is widely accepted today as a valid investment approach
and professional organizations around the world are devoted to its study -
including major universities teaching for-credit courses.
Read the article
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Brent Bentrim discusses the process of building portfolios using measures
such as Returns-Based Style Analysis (RBSA), Sortino's Omega and Omega
Excess. Without these tools, says Bentrim, advisors will fail to
provide asset allocations consistent with their clients' investment policy
guidelines.
Read the article
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Letter to the Editor: Why Diversification is Failing
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Dennis Gibb of Sweetwater Investments gives his reasons why diversification
is still a valid concept, despite its failure to protect client assets.
Read the article
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Highlights from Advisor Market Commentaries
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Nouriel Roubini of the RGE Monitor analyses the Public-Private Partnership
Investment Program (PPIP).
Read the commentary
John Mauldin looks at a soon-to-be-released paper on the merits of bonds
versus stocks.
Read the commentary
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